dlhc-20240331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2024

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 0-18492

DLH HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

New Jersey

22-1899798

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification No.)

3565 Piedmont Road,

Building 3,

Suite 700

30305

Atlanta,

Georgia

(Zip code)

(Address of principal executive offices)

(770) 554-3545

(Registrant’s telephone number, including area code)

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	DLHC	Nasdaq	Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller Reporting Company

☒

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 14,232,891 shares of Common Stock, par value $0.001 per share, were outstanding as of April 30, 2024.

DLH HOLDINGS CORP.

FORM 10-Q

TABLE OF CONTENTS

Page No.



PART I FINANCIAL INFORMATION			3
ITEM I: FINANCIAL STATEMENTS			3
CONSOLIDATED STATEMENTS OF OPERATIONS			3
CONSOLIDATED BALANCE SHEETS			4
CONSOLIDATED STATEMENTS OF CASH FLOWS			5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY			6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS			7
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS			21
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK			30
ITEM 4: CONTROLS AND PROCEDURES			30
PART II OTHER INFORMATION			31
ITEM 1: LEGAL PROCEEDINGS			31
ITEM 1A: RISK FACTORS			31
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS			31
ITEM 3: DEFAULTS UPON SENIOR SECURITIES			31
ITEM 4: MINE SAFETY DISCLOSURES			31
ITEM 5: OTHER INFORMATION			31
ITEM 6: EXHIBITS			33
SIGNATURE			34

PART I FINANCIAL INFORMATION

ITEM I: FINANCIAL STATEMENTS

DLH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)


	Three Months Ended				Six Months Ended
	March 31,				March 31,
	2024		2023		2024		2023
Revenue	$	101,007	$	99,417	$	198,857	$	172,155
Cost of operations:
Contract costs	79,112		78,238		158,193		135,494
General and administrative costs	11,710		10,693		19,407		18,117

Corporate development costs	—		—		—		1,735
Depreciation and amortization	4,243		4,535		8,496		6,937
Total operating costs	95,065		93,466		186,096		162,283
Income from operations	5,942		5,951		12,761		9,872
Interest expenses	4,190		4,765		8,848		6,595
Income before provision for income tax	1,752		1,186		3,913		3,277
Provision for income tax (benefit) expense	(60)		381		(50)		925
Net income	$	1,812	$	805	$	3,963	$	2,352

Net income per share - basic	$	0.13	$	0.06	$	0.28	$	0.17
Net income per share - diluted	$	0.12	$	0.06	$	0.27	$	0.16

Weighted average common stock outstanding
Basic	14,205		13,759		14,118		13,530
Diluted	14,946		14,600		14,823		14,447

The accompanying notes are an integral part of these consolidated financial statements.

DLH HOLDINGS CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value of shares)


	March 31, 2024		September 30, 2023
	(unaudited)
ASSETS
Current assets:
Cash	$	238	$	215
Accounts receivable	55,457		59,119
Other current assets	2,221		3,067
Total current assets	57,916		62,401
Goodwill	138,161		138,161
Intangible assets, net	116,549		124,777
Operating lease right-of-use assets	8,315		9,656
Deferred taxes, net	3,028		3,070
Equipment and improvements, net	1,787		1,590
Other long-term assets	186		186
Total assets	$	325,942	$	339,841
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	23,035	$	29,704
Debt obligations - current, net of deferred financing costs	17,178		17,188
Accrued payroll	11,756		13,794
Operating lease liabilities - current	3,242		3,463
Other current liabilities	996		638
Total current liabilities	56,207		64,787
Long-term liabilities:
Debt obligations - long-term, net of deferred financing costs	147,610		155,147
Operating lease liabilities - long-term	14,242		15,908
Other long-term liabilities	1,133		1,560
Total long-term liabilities	162,985		172,615
Total liabilities	219,192		237,402
Shareholders' equity:
Common stock, $0.001 par value; 40,000 shares authorized; 14,230 and 13,950 shares issued and outstanding at March 31, 2024 and September 30, 2023, respectively	14		14
Additional paid-in capital	100,322		99,974
Retained earnings	6,414		2,451
Total shareholders’ equity	106,750		102,439
Total liabilities and shareholders' equity	$	325,942	$	339,841

The accompanying notes are an integral part of these consolidated financial statements.

DLH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Six Months Ended
	March 31,
	2024		2023
Operating activities
Net income	$	3,963	$	2,352
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	8,496		6,937
Amortization of deferred financing costs charged to interest expense	1,040		904
Stock-based compensation expense	1,573		1,352
Deferred taxes, net	42		—

Changes in operating assets and liabilities:
Accounts receivable	3,662		(1,057)
Other assets	2,187		719
Accounts payable and accrued liabilities	(6,669)		(4,757)
Accrued payroll	(2,038)		8
Other liabilities	(1,955)		404
Net cash provided by operating activities	10,301		6,862
Investing activities
Business acquisition, net of cash acquired	—		(180,711)
Purchase of equipment and improvements	(466)		(463)
Net cash (used in) investing activities	(466)		(181,174)
Financing activities
Proceeds from revolving line of credit	161,555		32,594
Repayment of revolving line of credit	(157,079)		(11,264)
Proceeds from debt obligations	—		168,000
Repayments of debt obligations	(13,063)		(7,125)
Payments of deferred financing costs	—		(7,622)
Proceeds from issuance of common stock upon exercise of options and warrants	261		287
Payment of tax obligations resulting from net exercise of stock options	(1,486)		(649)
Net cash (used in) provided by financing activities	(9,812)		174,221
Net change in cash	23		(91)
Cash - beginning of period	215		228
Cash - end of period	$	238	$	137
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	7,873	$	5,714
Cash paid during the period for income taxes	$	1,798	$	3,202
Supplemental disclosure of non-cash activity
Common stock surrendered for the exercise of stock options	$	2,324	$	238

The accompanying notes are an integral part of these consolidated financial statements.

DLH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited, in thousands, except for per share data)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Total Shareholders' Equity
	Shares	Amount
Balance at September 30, 2023	13,950	$	14	$	99,974	$	2,451	$	102,439

Expense related to director restricted stock units	—	—		259		—		259
Expense related to employee stock-based compensation	—	—		1,314		—		1,314
Exercise of stock options	535	—		261		—		261
Common stock surrendered for the exercise of stock options	(255)	—		(1,486)		—		(1,486)
Net income	—	—		—		3,963		3,963
Balance at March 31, 2024	14,230	$	14	$	100,322	$	6,414	$	106,750


Balance at December 31, 2023	14,105	$	14	$	100,186	$	4,602	$	104,802

Expense related to director restricted stock units	—	—		180		—		180
Expense related to employee stock-based compensation	—	—		774		—		774
Exercise of stock options	315	—		—		—		—
Common stock surrendered for the exercise of stock options	(190)	—		(818)		—		(818)
Net income	—	—		—		1,812		1,812
Balance at March 31, 2024	14,230	$	14	$	100,322	$	6,414	$	106,750

Common Stock

Additional
Paid-In
Capital

Retained Earnings

Total Shareholders' Equity

Amount

Balance at September 30, 2022

SEC Form 10-Q filed by DLH Holdings Corp.